Q2-2026 Market Outlook
Key Takeaways in the 2026 Market Outlook
Markets have stayed resilient despite geopolitical tensions
With the conflict in the Middle East, markets have been volatile, with equities initially falling by 9% but staging a v-shaped recovery. On average, markets tend to bottom around 3 weeks after a shock and recover within six to twelve months after, ending 3%-5% higher than the pullback. This recent episode followed a similar pattern, with markets initially declining before rebounding strongly on ceasefire announcements and renewed peace talks.
Should I sell when war breaks out?
History says usually, NO - Past geopolitical events show temporary volatility, followed by recovery six to twelve months after.
US Equity Returns |
1 month after |
6 months after |
12 months after |
| Average | -1.40% | 2.80% | 5.10% |
| Median | 0.70% | 4.20% | 8.90% |
| % of Positive Returns | 50% | 63% | 80% |
Source: Bloomberg and Deutsche Bank
Strong earnings results support global equity rally
Global equities continue to be supported by solid company performance, particularly in the technology sector. Investor appetite remains strong as earnings expectations are being revised upward, helping push markets to new highs. Large tech-driven markets like the US, Korea and Taiwan have remained the most resilient. Year to date, these markets also enjoyed the biggest bump up in year-on-year earnings growth - US: 23%, Korea: 230%, Taiwan: 59% buoyed by capex spending in artificial intelligence.
Technology remains a key driver, especially in Asia
Technology continues to stand out as the strongest area of growth, especially with ongoing investments in Artificial Intelligence (AI). In Asia, tech earnings are rising faster than other sectors, while consumer-related sectors are slowing. Even with higher energy costs and geopolitical risks, demand for technology remains strong and countries like Japan, Korea and Taiwan form an integral part of this value chain. This shows that long-term investment themes, like digitalization and AI, are gaining momentum as use cases and adoption rates accelerate.
The Philippines faces structural challenges causing it to struggle compared to peers.
Philippine equities have lagged behind global markets due to structural challenges, currency weakness and governance issues. While global markets posted strong gains at 9.5% year to date, Philippine equities declined by around 0.75%. The recent geopolitical tensions have not helped as the country is very reliant on Middle East oil imports. This further adds inflationary pressure and has a dampening effect on consumer sentiment and spending.
Bright Idea: Stay diversified, stay invested.
Markets may remain volatile in the short term due to these risks. However, long-term drivers such as strong corporate earnings, strong macro fundamentals, and stable global demand remain intact. With this trend persisting in 2026, we recommend positioning your portfolio towards our global funds in order to capture these growth trends. We continue to favor technology-linked indices and recommend clients to gain exposure to these themes.
Sources: Bloomberg, Sun Life Asia Asset Management, SLIMTC
